Taxes · Module 6 of 6
Money that is not wages
How tax works on investment gains, losses and dividends, and how a loss can lower the tax on a gain.
Key terms in Money that is not wages
- Capital gain and capital loss
A capital gain or loss arises when a capital asset is sold. It equals the difference between the amount realized and the asset's adjusted basis. A gain results when the sale price is higher, a loss when it is lower. In the United States, assets held longer than a year are treated as long-term and often taxed at lower rates.
Source: Internal Revenue Service, Topic no. 409, Capital gains and losses
- Basis
Basis is generally the amount paid for an asset, and it is the reference point for measuring tax gain or loss when the asset is later sold. Adjusted basis reflects later changes such as improvements or depreciation. Basis also feeds into calculations of depreciation, depletion and casualty losses for property.
Source: Internal Revenue Service, Topic no. 703, Basis of assets
- Taxable interest
Taxable interest is income earned on bank accounts, certificates of deposit, bonds and similar holdings that counts toward a U.S. taxpayer's income in the year it becomes available. Some interest, such as that on many state and municipal bonds, is exempt from federal tax. Payers send a Form 1099-INT above a small threshold.
Source: Internal Revenue Service, Topic no. 403, Interest received
Every term on Lever is in the money glossary.
About this module
Money that is not wages is part of Taxes, one of 15 subjects in Lever. It’s a short run of 6 lessons, about 15 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Taxes
-
1
The part that is not yours
Why we pay taxes, what income they’re worked out on, and how to set tax aside yourself when no one does it for you.
5 lessons -
2
What your rate really is
How tax brackets really work, and the difference between the rate on extra income and the rate you actually paid.
5 lessons -
3
What you can subtract
Tax deductions versus tax credits, the standard amount versus itemizing, and keeping proof for your claims.
8 lessons -
4
The paperwork year
Filing your tax return: who needs to, when it’s due, whether to pay for help, and how to fix a mistake.
7 lessons -
5
What was already taken
The tax taken from your paycheck, why it’s never exactly right, and how it gets squared up at the end of the year.
5 lessons
Try this module
It’s part of Taxes. Lever will bring it to you when you’re ready, or you can go straight there.